Indo-Bangladesh trade relationship has been the cause for yet another controversy in the bilateral relations of the two countries which have seen several problems in the political arena in recent times. These differences become apparent during the trade talks taking place between the two countries at regular intervals.

Though both the countries always show their intention to raise the volume of South Asia regional trade through preferential trading arrangements, several problems crop up when the nitty-gritty is being discussed. A major irritant is the persistent huge trade imbalance that exists between both the countries, strongly in favour of India. Bangladesh’s imports from India figured US$ 1022 million in fiscal year 2001-02 while its exports to India were worth only US$ 50.28 million. Its trade deficit with India jumped to US$ 971.72 million in 2001-02 from US$ 332.12 million in 1992-93.

To reduce this trade imbalance, Bangladesh demands easy and tariff free access to the Indian market on a non-reciprocal basis. As India has also to safeguard its business and trade interests, it has suggested another way out of this problem.  It wants Bangladesh to sign a free trade agreement as India has done with Sri Lanka. A freer trade environment can also take Nepal in its ambit and start a process of sub-regional cooperation between Nepal, Bangladesh and India.

India wants Bangladesh to provide it with transshipment facility which will facilitate the movement of goods to and from the landlocked northeastern states by reducing the distance. It believes that this facility would give a major impetus to the development process of this backward area infested by insurgency. Besides, it can also provide some useful revenue to Bangladesh.

Bangladesh has been accusing India of obstructing its exports through non-tariff barriers. It wants preferential market access and also wants rewriting of the bilateral trade agreement paving the way for more trade with northeastern Indian states.

To sort out some of these issues Bangladesh and India signed an agreement in New Delhi on March 25 under which India agreed to provide duty-free access for 39 more items, out of 121 Dhaka has been pressing for. Under a previous arrangement, India had allowed duty-free access for 40 items. Pharmaceuticals, toiletries, cosmetics, steel and plastic furniture, and copper wire are among the new items.

Besides tariff and non-tariff barriers, problems also relate to the underdevelopment of Land Customs Stations (LCS), infrastructural bottlenecks connecting entry and exit points in border belts, banking facilities and administrative complexities. To tackle these problems, India and Bangladesh agreed on the common list of ten Land Customs Stations in the border areas, five on each side, in the first phase. They also agreed to improve the infrastructural facilities within a timeframe. India also agreed to provide Bangladeshi exporters with facilities for their trucks to come to customs points.

However, there are several issues on which no agreement could be reached. They could not complete negotiations for a new or revised bilateral trade agreement. But they agreed to renew the existing trade agreement from time of time until it is replaced with a new one. Though India gave duty-free access to 39 items, it pointed out that further duty free concessions could be considered under the framework of a bilateral Free Trade Arrangement.

During the talks, India pointed out the delay in convening a meeting of the joint group of experts of the two countries to consider issues related to border trade, trans-shipment of Indian goods through Bangladesh territory, and deepening of tariff concessions. But Bangladesh pointed out that these issues would be discussed at the coming Joint Economic Commission meeting in Dhaka in July. It wants to consider a free trade agreement with New Delhi only after the trade deficit between the two countries is reduced significantly.

Though some progress has been made in the Indo-Bangladesh trade relations after the latest round of commerce secretary level talks, a number of issues still remain unresolved. It has to be realized by Bangladesh that to get a favourable trade balance it should take steps which make its industries more competitive, allowing it to sell its products in South Asian markets. Unless that is done it is very difficult for the Bangladeshi goods to create a place for themselves in Indian market.